Cryptos are bought at exchanges. A buyer has an account with a crypto exchange. A buyer orders cryptos through an exchange. The exchange finds a match from the market and takes the delivery of the cryptos on behalf of the buyer. A crypto account with an exchange is KYC verified. The platform’s bank account is loaded with fiat currency to trade for the cryptos. As the process is not regulated, there could be variations in the process.

The cryptos thus purchased are kept in an insured wallet. Some exchanges give the custody of the assets to the buyer. Many exchanges maintain a wallet. The user funds are moved through the wallet on authorisation.

In crypto transactions, the saying is, ‘ Not your keys, not your crypto.’ It refers to the custody of the tokens. Typically, a private key, which is alphanumeric, gives one ownership of a crypto asset.

In India, however, most exchanges are centralised. It means they hold the keys. It enables faster transactions. It violates the concept in crypto buying and selling — the presence of an intermediary. However, this is for the sake of convenience. The custodial wallet facilittates faster transactions. Some investors, too, are averse to holding keys, as there is possibility of misplacement which means the loss of the assets.

Centralised exchanges are vulnerable to theft and hacking. Once the exchanges are licensed. Crypto trading will be less risky.